Foreclosure drop may, or may not, be result of new law

Foreclosures in Orlando —- and the rest of Florida — have dropped dramatically since the state started expediting them under a new law that took effect July 1.

Compared with a year ago, the number of new foreclosure filings has been cut at least in half, new reports show. According to one of those reports, by RealtyTrac Inc., the number of houses in four-county Metro Orlando that got their first foreclosure notice in August dropped to 678 — a decrease of 63 percent from a year earlier.

A new statewide report from the Florida Supreme Court system shows the number of foreclosure cases filed in July fell 75 percent compared with July 2012.

It's uncertain whether the falloff in Florida foreclosures is tied to the new law, which was designed to streamline lenders' ability to repossess houses with overdue mortgage payments. Seminole County Chief Circuit Judge Alan Dickey said this week it will take at least six months to determine whether the decline in activity is at all tied to the law.

But foreclosure attorney Matthew Weidner, of St. Petersburg, said the dropoff has been caused by mortgage servicers and banks that have been unable to document that they control the loans — as required by the legislation.

"The unintended consequence of this bill should be that public policymakers should realize we have a much bigger problem in front of us," he said. The larger problem, he added, is that the new law was not written in a way that the courts and the lending industry can easily understand.

What mortgage companies are doing when they lack the necessary documents, Weidner said, is either modifying the mortgage or selling the house as a short sale. Short sales, which occur when a house sells for less than the amount owed on it, have been on the rise throughout the state in recent months.

Foreclosures, meanwhile, have fallen: In Metro Orlando during August, 2,415 houses got at least some type of foreclosure filing, a 27 percent decrease from a year ago and an 11 percent decline from a month earlier, according to RealtyTrac. The Orlando metropolitan area consists of Orange, Osceola, Lake and Seminole counties.

RealtyTrac Vice President Daren Blomquist said it was too early to say if the law isn't working.

Even though overall foreclosure activity is down sharply for the Orlando area from a year ago, the courts have approved an increased number of auction notices and foreclosure-sale notices in the metro area, Blomquist noted.

One indication that a wave of new foreclosure cases are waiting to be filed is that banks have increasingly started doing the title-search prep work necessary to begin the foreclosure process, he said.